What’s Next for Climate Regulations in 2025

This article was originally published on carbonbetter.com on January 31, 2025. Subscribe to our LI newsletter, Sustainable Progress, to get regular updates about new content and upcoming events.

The impact of climate legislation on US businesses.

By CarbonBetter

US-based businesses are facing a rapidly shifting regulatory landscape when it comes to climate-related policies. With a new administration in place, significant changes to environmental regulations are either underway or expected. Timelines for some rules, like the Securities and Exchange Commission (SEC) climate disclosure requirements which are already facing legal scrutiny, may have got extended while others, such as state-level mandates from California and international reporting obligations like the European Union’s Corporate Sustainability Reporting Directive (CSRD), are set to take effect over the next few months. Thus, despite federal changes, given that state and international regulations are still moving forward, companies with global supply chains or with business in key states must stay ahead of compliance requirements.

Large companies and corporations operating in jurisdictions with strong climate laws—such as California and the European Union—will need to assess their exposure to new reporting mandates. Even if federal rules become more relaxed, businesses that interact with markets where disclosure is required will still need to comply with those standards. This makes understanding the evolving regulatory framework crucial for corporate risk management, investor relations, and long-term sustainability planning.

Below, we’ve outlined the key climate-related regulations and reporting requirements that U.S. businesses must be aware of, including effective dates, affected companies, and potential implications.

California Climate Disclosure Laws (SB 253 and SB 261)

• Enactment Date: October 7, 2023
• Effective Dates:SB 253 (Climate Corporate Data Accountability Act): Reporting begins in 2026 using 2025 data.SB 261 (Climate-Related Financial Risk Act): First reports due in 2026.
• Details:SB 253: Requires businesses with annual revenues over $1 billion operating in California to disclose Scope 1, 2, and 3 emissions. Law requires these environmental footprint estimations (Scope 1,2 and 3) to be assured by an independent third party.SB 261 (Climate-Related Financial Risk Act): Requires businesses with annual revenues over $500 million to assess and disclose climate-related financial risks following TCFD guidelines.
• Impacted Businesses: Any company meeting the revenue threshold and doing business in California (here is the criterion specified by State of California Franchise Tax Board), regardless of whether they are headquartered there.
• Implications: Companies must invest in emissions tracking, climate risk assessment, and regulatory compliance teams to meet California’s stringent standards.

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Corporate Sustainability Reporting Directive (CSRD) (EU Regulation Impacting U.S. Businesses)

• Adoption Date: November 10, 2022
• Effective Dates:2025: For companies already subject to the Non-Financial Reporting Directive (NFRD), first reports are due.2026: For large companies not currently subject to the NFRD, first reports are due.2027: For listed small and medium-sized enterprises (SMEs), first reports are due.2029: For US based companies with subsidiaries in the EU, first reports are due.

• Details: Requires detailed sustainability reporting, including environmental, social, and governance (ESG) factors.
• Impacted Businesses: U.S. companies with substantial operations in the EU will need to report per this standard. While official reporting is still some years out, European clients will begin expecting US companies to share CSRD mandated information when comparing against their EU counterparts.
• Implications: Affected companies will need to align sustainability reporting with EU standards, both for compliance purposes and to sustain their competitive advantage against EU counterparts. Getting ready for CSRD will require significant changes to data collection, cross-functional collaboration and disclosure practices.

EU Corporate Sustainability Due Diligence Directive (CSDDD) (Expected to Be Adopted in 2025)

• Expected Adoption Date: 2025
• Effective Date: Likely 2026 or 2027
• Details: The CSDDD will impose mandatory due diligence obligations on companies regarding human rights and environmental risks in their supply chains.
• Impacted Businesses: U.S. companies with significant operations in the EU or with supply chain partners that fall under EU jurisdiction.
• Implications: Companies will need to conduct due diligence on environmental and social risks within their global supply chains and implement corrective measures.

Federal Supplier Climate Risks and Resilience Rule

• Proposed Date: 2022 (Proposed but unlikely to take effect).
• Potential Implementation Date: Uncertain due to policy shifts under the current administration
• Details: Would require major federal contractors to disclose greenhouse gas emissions and climate-related financial risks.
• Impacted Businesses: Large suppliers contracting with the U.S. federal government.
• Implications: If implemented, affected businesses will need to integrate emissions tracking and climate risk disclosure into their federal compliance processes.

Securities and Exchange Commission (SEC) Climate Disclosure Rule

• Adoption Date: March 6, 2024 (Currently stayed during litigation).
• Initial Compliance Date: Previously set for fiscal years ending on or after December 31, 2025 (for large accelerated filers), the initial compliance date is now uncertain, and the rule may be repealed.
• Details: The SEC adopted rules requiring publicly traded companies to disclose material climate-related risks, including greenhouse gas (GHG) emissions and financial risks associated with climate change. However, the rule is currently stayed due to litigation and is unlikely to pass in the next four years.
• Impacted Businesses: Publicly traded companies, particularly large accelerated filers, must comply with these disclosure requirements.
• Implications: Companies will need to enhance tracking and reporting of climate-related risks, invest in sustainability reporting infrastructure, and prepare for potential investor and stakeholder scrutiny.

Preparing for the Future

As the regulatory landscape continues to evolve, businesses should take proactive steps to stay ahead of applicable rules and regulations and ensure compliance. Here are steps your business can take and how CarbonBetter can help.

Contact us today for help with any of these steps.

How CarbonBetter Can Help

Navigating the complex world of evolving and emerging sustainability regulations requires expert guidance. At CarbonBetter, we offer applicability assessments and gap analyses to first determine which frameworks your business must comply with. Our experts can then help you tell your sustainability story, with reporting, and by ensuring compliance with the latest standards.

Conclusion

We are at a critical juncture point in regulation. In a world in which climate regulations are picking up pace and businesses are realizing the urgent need to build resilience, it’s more important than ever to be proactive. By partnering with CarbonBetter, you can confidently navigate the fast-changing regulatory landscape, mitigate non-compliance risks, and identify growth opportunities.

No matter where you are in your climate journey, we are here to help. Reach out today to get started.

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